Trump vows to strangle Iran’s economy, but China buys most of its oil: Can Washington really shut Tehran’s main lifeline?

The Trump administration has launched a sweeping new economic pressure campaign against Iran, but one problem sits at the centre of its effort to choke Tehran’s oil revenues: China.

China has been the overwhelming buyer of Iranian oil for years. Reuters, citing Kpler data, reported that China purchased more than 80% of Iran’s shipped oil in 2025, averaging about 1.38 million barrels per day. Much of the crude goes to independent Chinese refineries, commonly known as “teapots”, which are attracted by the deep discounts offered on Iranian barrels.

That makes Beijing central to any US attempt to cut Iran’s remaining oil income. Washington can target Iranian producers, brokers, tankers and financial intermediaries, but putting enough pressure on the Chinese companies that keep buying the crude creates a much larger diplomatic and economic challenge.

What has Washington done?

US Treasury Secretary Scott Bessent announced what the department called an “economic onslaught” against Iran on Monday.

The latest campaign includes sanctions on nearly 60 individuals, entities and vessels. The targets include networks involved in Iranian oil sales, shipping and finance, as well as procurement networks supporting Iran’s ballistic missile and nuclear programmes.

The US has also warned countries and companies that continue economic activity with Iran that they could face restrictions on access to the US financial system.

The measures extend the range of activities that could trigger secondary sanctions, including dealings involving cryptocurrency, technology, gold, aviation and shipping. New oil-related designations include vessel brokers, bunkering providers, financial intermediaries and five tankers identified by Treasury as part of Iran’s “shadow fleet”.

But the latest package stopped short of directly targeting major Chinese financial institutions.

Why China is the critical link

Iran’s oil exports have survived years of US sanctions largely because China has remained a major outlet.

Reuters reported that Chinese independent refineries, particularly those concentrated in Shandong province, are the main buyers of Iranian crude. Iranian oil can trade at discounts of several dollars a barrel compared with benchmark crude, giving these refiners an incentive to continue purchasing it.

Large Chinese state-owned oil companies have generally avoided Iranian crude because of US sanctions, leaving smaller independent refiners to handle much of the trade.

The trade is also designed to evade sanctions. Iranian oil can be relabelled as originating elsewhere, while shipments move through complex networks of traders, vessels and intermediaries. Reuters reported that Chinese customs data has not officially recorded imports from Iran since 2022 despite the substantial volumes tracked by analysts.

Washington has already tested the China o ption

The Trump administration has not completely avoided targeting Chinese buyers.

In April, the US sanctioned Hengli Petrochemical’s Dalian refinery for purchasing billions of dollars’ worth of Iranian oil. Reuters reported that the action was accompanied by sanctions on around 40 shipping companies and vessels linked to Iran’s shadow fleet.

China strongly objected, calling the measures illegal and urging Washington to stop using sanctions against Chinese companies.

The problem for Washington is that many independent Chinese refiners have relatively limited exposure to the US financial system. That can make sanctions less immediately effective than they would be against a large international bank or multinational oil company.

Why has Washington held back on Chinese banks?

The latest sanctions provide an important clue.

Reuters reported that the new list of roughly 60 targets did not include Chinese financial institutions suspected of facilitating Iran’s oil trade. The report said Washington is also preparing for a possible meeting between Trump and Chinese President Xi Jinping, while seeking Chinese cooperation on broader issues.

Bessent has previously warned that China could face consequences for continuing to support Iran, but he has also suggested that discussions over potential measures against Beijing would be handled privately.

China, meanwhile, has rejected the premise behind the US pressure campaign.

A Chinese government spokesperson said the country’s cooperation with Iran is conducted within international law and should not be interfered with or disrupted.

Can the US squeeze Iran without targeting China?

That is the central challenge facing Washington.

The US can make Iranian oil more expensive and difficult to move by targeting brokers, insurers, tankers, ports and intermediaries. The latest measures are designed partly around this strategy. Reuters reported that Washington is also giving other countries timelines to wind down economic activity with Iran and threatening further action against those that do not comply.

But if Chinese teapot refineries continue buying Iranian crude, Tehran retains a major source of foreign currency.

Cutting that channel more aggressively would require Washington to consider sanctions against Chinese companies and potentially financial institutions that facilitate the trade. That could turn the Iran sanctions campaign into another source of direct economic friction between Washington and Beijing.

There is also a wider energy calculation. Bessent has argued that China has a strong interest in restoring stability because a large share of its energy supplies comes from the Gulf. Reuters reported that China buys more than 80% of Iran’s shipped oil, while Bessent has said Beijing has an incentive to cooperate because of its dependence on Gulf energy.

The oil lifeline is already under pressure

Iran’s oil flows have nevertheless fallen. Reuters reported that a US blockade of Iranian ports has reduced Iranian oil flows to China since Washington renewed the blockade in mid-July.

The Strait of Hormuz adds another layer of uncertainty. Provisional Vortexa data cited by Reuters put oil transits through the strait at about 5 million barrels per day on Monday, down sharply from more than 20 million barrels per day before the war.

That means Washington is attempting to squeeze Iran’s oil revenues while the physical movement of energy through the Gulf is already under severe pressure.

For the sanctions strategy to substantially weaken Tehran’s remaining oil lifeline, the US therefore faces a difficult choice: intensify pressure on the networks moving Iranian crude to China, or directly confront the Chinese refiners, traders and financial institutions that ultimately keep much of that trade alive.